TC2's David Rohde on Telecom

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Sprint’s big deal with LightSquared plays out in the shadow of AT&T/T-Mobile

By Posted August 5, 2011

Last week Sprint finally announced its deal with 4G LTE national start-up LightSquared, constituting Sprint’s entry into LTE, if not necessarily its exit from WiMax. For context, I think it’s telling what JP Morgan said to investors in a note about the deal:

“While we don’t expect Sprint shares [in other words, Sprint’s stock] to get much credit for this until the FCC has ruled on LightSquared’s new plan, we do believe that Sprint has already started to receive payment from LightSquared for services. Assuming FCC signoff, we expect the first 4G LTE signals from Sprint and LightSquared in 2Q12.”

Translated from Wallstreet-ese, that means there are many moving parts. LightSquared has regulatory issues convincing the powers that be that it’s not interfering with GPS and public safety. It would take about a year for Sprint to make this part of its new LTE strategy marketable. And Sprint is only confirming this LightSquared deal – something Bloomberg News Service spilled the beans on back in June – rather than completely refreshing its “Network Vision” to explain the retrofitting of its own network for LTE.

Meanwhile, a lot could happen with Sprint in a year. AT&T and T-Mobile are now advertising on television – at least here in Washington where I’m based – about the complete and utter wonderfulness of their engagement. I think they want the regulators to fall in love too. These types of “we’re great/we benefit society” ads from companies with an agenda have kept Washington TV and newsradio stations profitable for years!

Sprint, for its part, is continuing to make WiMax-focused announcements, even if they’re not terribly material to enterprise buyers. Just this week Sprint said it’s wholesaling its existing 4G coverage, handsets and data cards to other, smaller providers and distributors.

The reality is that Sprint’s ultimate 4G plan, still to come, is playing out in the shadow of the AT&T/T-Mobile deal. No matter what it says in the network and handset wars, AT&T has no bigger priority than to get the government to approve its T-Mobile deal. No matter what Sprint says about LTE, WiMax, or even potentially the iPhone, Sprint has no bigger priority than to get the government to stop the AT&T/T-Mobile deal

With Sprint officials openly saying that an AT&T/T-Mobile marriage could end Sprint’s run as an independent entity, the stakes are ramping up.

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